Why Badagry emerged preferred site for LNG shipyard project – BSMEC

21 September 2015, Lagos – Lead investors of the proposed $1.5 billion ship repair facility, Badagry Ship Repair and Maritime Engineering Company (BSMEC), Monday, disclosed that its decision to site the project in Badagry, rather than in the Niger Delta was based on a sound and rigorous feasibility studies.

The decision to site the project outside the Niger Delta has been a source of controversy, as different groups in the region have condemned the move, while some threatened to shut down the operations of Nigerian Liquefied Natural Gas Company, NLNG, in the region, especially in Rivers State over the alleged location of the Drydock in Badagry, Lagos.

This was even as the NLNG had dissociated itself from the ownership of the project, stating that its only involvement lies in encouraging investors to consider building dry docks in the country.

BSMEC, in a statement by its Project Director, Mr. Laolu Saraki, stated that for every wise investor, the place of a research-backed feasibility study cannot be relegated, adding that a painstaking process was carried out in order to produce a tested feasibility study.

According to him, the purpose of the feasibility study was primarily to answer some of the questions and concerns, one of which is if it is commercially viable to develop a new shipyard for the repair of large ships including LNG carriers. He said, “To answer this question, two fundamental pieces of information are required; the revenue available and the costs of developing and then operating the shipyard.

This information was then input to a business model to produce a business plan. “The pre-project technical consultant, Royal HaskoningDHV, took a completely independent approach working from first principles to establish the input for the business plan.

“To determine the revenue, Royal HaskoningDHV carried out a market study using raw data, local and regional, on vessel movements and fleet characteristics. This provided a picture of the total market available to a large ship repair yard situated in Nigeria.

“From the range of available vessel types and sizes identified, a coherent target mix was derived that would efficiently utilize the shipyard facilities. The only mandatory ship type to be included in this mix was large LNG carriers. A view was then taken on the proportion of the available market for the coherent target mix that the new shipyard could reasonably expect to capture.

“The resulting projected throughput was an average of 12% of the available market across the coherent target mix. The revenue could then be calculated by applying current market repair rates to the projected throughput.” Continuing, Saraki noted that, “The cost of developing a new large shipyard is dependent on the site conditions where it is constructed.

Therefore a search was made of the whole Nigerian coast and inland waterways for a location which provided the best technical balance of factors including access to deep water, good ground conditions, local workforce, free trade zone, transport links, access to suppliers and contractors.

“In addition to this, the perceived attractiveness of the location for ship owners and for investors was taken into account. Royal HaskoningDHV concluded that for the purposes of the feasibility study, Badagry Port should be the selected site to provide data input to the business model.
“Following the positive conclusion of the study, Royal HaskoningDHV was commissioned to manage an open competition to select the Lead Investor to take the project forward. Accordingly, potential investors and developers made written submissions, which were evaluated against a common set of criteria.

“The successful organization was Badagry Ship Repair and Maritime Engineering Company (BSMEC), a consortium of five Nigerian companies. Although we have been provided with the feasibility study, we do not have any onus to follow its findings.”

Saraki further stated that BSMEC is free to develop the new shipyard in whatever location and to carry out whatever throughput of business it wishes as long as it includes the capacity to repair large LNG carriers.

According to him, in return for the undertaking to include the LNG carrier repair capability, BSMEC is able to call upon the promotional support of the initiators of the feasibility study, namely Nigeria LNG, Hyundai Heavy Industries and Samsung Heavy Industries.
He, however, reiterated the unwavering commitment of BSMEC to bring this concept to reality and use it as a veritable platform to contribute substantially to Nigeria’s economic growth.